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Cottini v. Berggren

Supreme Court of Alaska

June 15, 2018

MARC COTTINI, Appellant,
v.
JOHN BERGGREN and OLENA BERGGREN, Appellees.

          Appeal from the Superior Court No. 3AN-13-01828 PR of the State of Alaska, Third Judicial District, Anchorage, Catherine M. Easter, Judge.

          Susan Orlansky, Reeves Amodio LLC, Anchorage, for Appellant.

          Christina M. Passard, Woelber & Passard, LLC, Anchorage, for Appellees.

          Before: Stowers, Chief Justice, Winfree, Maassen, Bolger, and Carney, Justices.

          OPINION

          STOWERS, CHIEF JUSTICE.

         I. INTRODUCTION

         A former agent, appointed under a power of attorney, successfully defended an accounting of his actions, expenditures, and fees against objections and counterclaims by his former principal. In this appeal we are asked to resolve whether the former agent is entitled to reimbursement from his former principal for reasonable attorney's fees incurred in maintaining that defense. The superior court denied the agent's request for attorney's fees because the dispute occurred in the context of a guardianship proceeding and because the request did not meet the requirements of AS 13.26.291, which governs cost-shifting in guardianship proceedings. The agent appeals, arguing that AS 13.26.291 does not apply, that he is entitled to attorney's fees based on his authority as an agent to hire an attorney under AS 13.26.665(m), and that he is entitled to attorney's fees based on common law principles, equity, and considerations of public policy. We conclude that neither statute applies, but that the agent may be entitled to reimbursement of his attorney's fees under the common law of agency and as a matter of equity. We therefore reverse the superior court's order and remand for further proceedings.

         II. FACTS AND PROCEEDINGS

         John Berggren is an Anchorage resident with business and real estate interests worth over $12 million. He executed a general power of attorney in 2007 naming Marc Cottini as his attorney-in-fact-his legal agent[1] - in the event he became incapacitated. Berggren suffered a traumatic brain injury in July 2013, triggering the power of attorney. After the accident Berggren's attorney, David Shaftel, informed Cottini that he had been named Berggren's agent. Shortly after Cottini assumed his role as agent, Berggren's wife Olena filed a petition for guardianship. Acting as Berggren's agent, Cottini opposed the guardianship petition on Berggren's behalf. Over the next eight months, Cottini acted as Berggren's agent until, after court-ordered medical examinations concluded that Berggren had regained the capacity to manage his own affairs, the court terminated the agency. Olena withdrew her guardianship petition shortly afterwards. The court ordered Cottini to produce an accounting of his actions and expenditures during the time of his agency, which he did with the assistance of Shaftel's law firm. Shaftel represented Cottini in his capacity as Berggren's agent.

         The accounting requested the court approve $71, 683.57 as Cottini's fees and costs for acting as Berggren's agent. This included compensation for Cottini's time at a rate of $50 per hour. Cottini later declared that the accounting showed he processed transactions involving $1, 064, 947 including handling Berggren's personal and joint expenses and paying invoices amounting to $242, 263. Berggren objected to Cottini's accounting, [2] arguing that Cottini's actions were not taken to advance Berggren's best interests, and that Cottini's fees were excessive.

         Berggren also filed counterclaims alleging breach of Cottini's fiduciary duties and listing objections to specific requested fees and costs. Cottini hired a second attorney, Diane Vallentine, who appeared before the court "for the sole purpose of representing Mr. Cottini with regard to the Joint Objection to Accounting of Agent's Fees." Documents filed with the court consistently identified Shaftel as representing Cottini in his capacity as agent and Vallentine as representing Cottini individually; despite making this distinction, the two attorneys consistently cosigned filings and worked together.

         Eventually, the parties settled. Berggren agreed to dismiss the counterclaims with prejudice, withdrew the objections, and agreed to pay most of what Cottini had initially requested; Cottini agreed to accept a slightly reduced total amount in fees and reimbursement in exchange for prompt payment. The parties reserved all issues regarding attorney's fees for decision by the court.

         Shortly thereafter, Cottini filed a motion asking the court to award him $ 148, 254 in attorney's fees incurred for Vallentine's work in assisting him in responding to Berggren's objections and in defending against Berggren's counterclaims. Cottini argued that as the appointed agent he was required to prepare an accounting of his actions, expenditures, and fees and that he was entitled to full payment of the attorney's fees he incurred in successfully defending the accounting under the power of attorney statute, specifically AS 13.26.665(m)(4), [3] which outlines a statutory agent's authority to hire and compensate attorneys. Cottini also contended that attorney's fees were warranted because Berggren had objected to the accounting in bad faith, and defending the accounting was necessary to make Cottini whole for his time and financial expenditures and to ensure third parties would not go unpaid. Berggren opposed the motion for attorney's fees, arguing that AS 13.26.665(m) did not apply because the legal services at issue benefited Cottini, not Berggren; that while the objections to Cottini's accounting were ultimately withdrawn, those objections were reasonable; and that the attorney's fees Cottini incurred were unreasonable. Berggren also argued that any request for legal fees should have been made under the fee-shifting provisions of Alaska Civil Rule 82.

         The superior court denied Cottini's motion for attorney's fees. The court held that AS 13.26.665(m)(4) did not apply to the fee request because the statute allows reimbursement only for attorney's fees incurred for services to the principal that the agent reasonably believes are desirable for the proper execution of the agent's powers. The court, citing Vallentine's limited entry of appearance for the sole purpose of representing Cottini with regard to Berggren's objections, concluded that none of the attorney representation with respect to Berggren's objections fell within that statutory framework. The court also concluded that Alaska Civil Rule 82 has been displaced by AS 13.26.291 (d)[4] as the governing rule for fee-shifting in any guardianship case, and that this statute required Berggren to pay for Cottini's attorney's fees only if adversary proceedings were initiated maliciously, frivolously, or without just cause. The court found that Berggren had not acted in such a manner when objecting to Cottini's accounting and that Cottini therefore was not entitled to attorney's fees. The court denied Cottini's motion and did not rule on any of Berggren's fact-based claims that some of the fees were excessive or unreasonable.

         Cottini appeals the single question whether he is entitled to reimbursement for reasonable attorney's fees incurred in defending his actions and expenditures as Berggren's agent and in defending his requested fees.

         III. STANDARD OF REVIEW

         "[W]e independently review 'whether the trial court properly applied the law when awarding attorney's fees.' "[5] "Determinations of which legal authorities apply in a case and interpretations of what those legal authorities mean are questions of law subject to de novo review."[6] When determining the meaning of a statute, we "look to the meaning of the language, the legislative history, and the purpose of the statute, " and "adopt the rule of law that is most persuasive in light of precedent, reason, and policy."[7]

         IV. DISCUSSION

         Cottini argues that the superior court erred in relying on AS 13.26.291 to deny his attorney's fees request because the statute's cost-shifting provisions refer to petitioners and respondents in a guardianship proceeding, and Cottini was neither. He also argues that AS 13.26.665(m) contains specific provisions that govern an agent's ability to hire attorneys, and that this statute therefore displaces Alaska Civil Rule 82's familiar fee-shifting provisions and entitles him to reasonable attorney's fees incurred in successfully defending against the challenges to his accounting because the defense also benefited Berggren. Finally, Cottini points to case law and treatises from analogous contexts, public policy concerns, and our decision in Marshall v. First National Bank Alaska, [8] all of which he argues support his construction of AS 13.26.665(m), or alternatively support an award of attorney's fees on either common law or equitable grounds.

         We conclude that AS 13.26.291, which applies in guardianship contexts, is inapplicable to the attorney's fees dispute here because this dispute is between an agent appointed under the statutory form power of attorney and his principal, not a respondent contesting a guardianship petition brought in bad faith. We also conclude that AS 13.26.665(m), while not inconsistent with the conclusion that an agent is entitled to attorney's fees incurred in a successful defense of his accounting, does not provide a controlling rule of decision. However, we hold that under the substantive common law of agency and as a matter of equity, an agent may be entitled to attorney's fees incurred in successfully defending his actions, expenditures, and fees, depending on a set of factors outlined in this opinion.

         A. Alaska Statute 13.26.291 Does Not Govern Cottini's Motion For Attorney's Fees.

         Alaska Statute 13.26.291 provides, in relevant part:

(a) Subject to (d) of this section, the state shall bear the costs of the visitor and expert appointed under AS 13.26.226(c).
(b) Subject to... (d) of this section, the respondent shall bear the costs of the attorney appointed under AS 13.26.226(b)...and of other court and guardianship costs incurred under this chapter.
(d) The court may require the petitioner to pay all or some of the costs described in (a) and (b) of this section if the court finds that the petitioner initiated a proceeding under this chapter that was malicious, frivolous, or without just cause.

As we recently explained in In re Vernon K, "Alaska Statutes 13.26.[291](a) and (b) allocate certain categories of costs in guardianship proceedings to the state, respondent, and petitioner."[9] Alaska Statute 13.26.291(d), in turn, "enables the court to shift those costs to the petitioner '. . . if the court finds that the petitioner initiated a proceeding under this chapter that was malicious, frivolous, or without just cause.' "[10] We also held that "fees of privately retained counsel and experts qualify for fee shifting pursuant to AS 13.26.[291](d) if the other requirements of that subsection are also satisfied, "[11] and that AS 13.26.291(d) therefore "entirely displaces Civil Rule 82" and "forecloses any role for Civil Rule 82 in the guardianship and conservatorship context."[12]

         The superior court concluded that AS 13.26.291(d) was the applicable standard for determining which party was responsible for the attorney's fees in this case, relying on our ruling in In re Vernon H. Berggren argues that AS 13.26.291 governs because the case now before us was initiated by a guardianship petition, Cottini was an active participant in the guardianship case, and Cottini filed his motion for attorney's fees in the guardianship case. Berggren also argues that Cottini's fees request falls within the statute's provisions because of our holding in In re Vernon H. that fees of privately retained counsel are covered by AS 13.26.291, and because, as Berggren puts it, subsection (b) of that statute "provides for the bearing of costs for 'other court and guardianship costs incurred under this chapter.' "[13] We disagree.

         Our explanation in In re Vernon H. of how AS 13.26.291 operates makes clear that this statute is inapplicable to this attorney's fees dispute. As we explained, "Alaska Statutes 13.26.[291](a) and (b) allocate certain categories of costs in guardianship proceedings to the state, respondent, and petitioner."[14] And "Alaska Statute 13.26.[291](d) enables the court to shift those costs to the petitioner '. . . if the court finds that the petitioner initiated a proceeding under this chapter that was malicious, frivolous, or without just cause.' "[15] Cottini is not a respondent seeking fees from a petitioner who initiated a guardianship proceeding, maliciously or otherwise. He is an agent appointed under a statutory form power of attorney seeking reimbursement from his principal for the cost of defending his actions, expenditures, and fees. Although Cottini requested attorney's fees for privately retained counsel, and In re Vernon H. held that fees of privately retained counsel are covered by AS 13.26.291 (d), that holding was made in the context of a respondent who was opposing a guardianship petition.[16]Reading In re Vernon H. to include the attorney's fees sought in this principal-agent case would require ignoring the plain language of AS 13.26.291. Unlike with private attorney's fees sought by a respondent in a guardianship case, there is no textual basis for applying AS 13.26.291 to an agent seeking reimbursement from his principal for attorney's fees incurred in defending his accounting.

         The superior court's factual analysis also illustrates the statute's incompatibility with this case. The court's analysis was not focused on whether Olena Berggren's initial decision to initiate a guardianship proceeding was frivolous, malicious, or without cause, as AS 13.26.291 directs.[17] Instead, it analyzed the opposition to Cottini's accounting, implicitly recognizing that the real underlying matter at issue was not the guardianship petition, but rather the dispute over whether Cottini had acted properly as an agent and was entitled to the agent's fees he requested. It is entirely coincidental that Cottini's request arose within the context of a guardianship proceeding, and we conclude that AS 13.26.291 does not provide the applicable rule of decision in this dispute.

         B. Alaska Statute 13.26.665(m) Does Not Apply To This Dispute But Is Not Inconsistent With Awarding Cottini Attorney's Fees.

         Alaska Statute 13.26.665 provides rules of construction for the statutory power of attorney form set out in AS 13.26.645. Berggren used the statutory form. Alaska Statute 13.26.665(m) provides in relevant part:

In a statutory form power of attorney, the language conferring general authority with respect to records, reports, and statements shall be construed to mean that, with respect to a record, report, or statement concerning the affairs of the principal, ... the principal authorizes the agent to
(1) keep records of cash received and disbursed for or on account of the principal, of all credits and debits to the account of the principal, and of all transactions affecting the assets and liabilities of the principal;
(4) hire, discharge, or compensate an attorney, accountant, or assistant when the agent reasonably believes the action to be desirable for the proper execution of the powers described in this subsection; and
(5) do any other act or acts that the principal can do through an agent in connection with the preparation, execution, filing, storage, or other use of any records, reports, or statements of or concerning the principal's affairs.

         Cottini asserts on appeal that just as AS 13.26.291 removed the fee-shifting dispute in the guardianship case at issue in In re Vernon H. from the scope of Rule 82, AS 13.26.665(m) does the same in this case. This is so, he argues, because AS 13.26.665(m)(4) "expressly governs the ability of an agent to retain an attorney to assist him regarding reports concerning the affairs of the principal" and because Rule 82 applies only when an alternate fee-shifting framework is not "otherwise provided by law." Accordingly, he argues that we should hold that AS 13.26.665 displaces Rule 82 when an agent seeks to recover attorney's fees from his principal.

         More specifically, Cottini argues that subsection (m)(1) authorized him to prepare an accounting of his handling of Berggren's affairs and subsection (m)(4) explicitly authorized Cottini to retain and compensate an attorney using Berggren's funds when he reasonably believed this was desirable for the proper execution of his power as Berggren's agent to prepare and submit an accurate accounting. Berggren appears to agree, conceding that Shaftel was entitled to compensation from Berggren for preparing the accounting. But Cottini argues further that under AS 13.26.665(m)(4) and (5), he is also entitled to be reimbursed for retaining Vallentine to assist him in defending the accounting.

         Berggren responds that AS 13.26.665(m) does not entitle Cottini to attorney's fees incurred in defending the accounting because only Shaftel, as the attorney who prepared the accounting, was hired pursuant to Cottini's authority as an agent under the power of attorney and AS 13.26.665(m)(1) and (4). Therefore, Berggren argues, although Cottini would be entitled to reimbursement for Shaftel's fees, he would not be entitled to reimbursement for Vallentine's.

         The statute does not help resolve this issue, for several reasons. First, the dispute hinges on whether retaining Vallentine to assist with responding to Berggren's objections to Cottini's accounting was within the scope of Cottini's powers as Berggren's agent. Cottini certainly had the power to "keep records of cash received and disbursed for or on account of the principal, of all credits and debits to the account of the principal, and of all transactions affecting the assets and liabilities of the principal, " as well as to "hire [and] compensate an attorney . . . when [he] reasonably believe[d] the action to be desirable for the proper execution of [this power]."[18] But the proper preparation of an agent's accounting is distinct from the defense of that accounting when challenged by the principal, and the latter does not clearly fall within the scope of the statute.

         Second, even assuming that retaining Vallentine was within the scope of Cottini's authority as agent, AS 13.26.665 contains no provisions actually relating to fee-shifting or reimbursement. The statute instructs courts on how to construe the powers of an agent outlined in the statutory form power of attorney.[19] Where the statutory form is used to appoint an agent, the statute ensures that the agent has the authority to hire and compensate an attorney on the principal's behalf while acting as agent.[20] But the statute contains no provisions obliging the principal to reimburse a former agent even for indisputably appropriate expenditures.[21] That is not to say that the principal has no such obligation, just that one does not arise from AS 13.26.665.

         Therefore, while the text of AS 13.26.665 says nothing to suggest Cottini is not entitled to reimbursement for attorney's fees incurred in the successful defense of his accounting, these fees do not clearly fall within its scope, and the statute by itself does not require that Berggren reimburse Cottini for them.

         C. Under The Common Law Of Agency, An Agent Is Entitled To Reasonable Attorney's Fees Incurred In Successfully Defending His Accounting If That Defense Benefited The Principal.

         A power of attorney, such as the statutory form Berggren executed, is a legal instrument granting authority to an agent to act on behalf of the principal who executed it.[22] Berggren's power of attorney established a fiduciary principal-agent relationship between Berggren and Cottini and created duties between them. This relationship is subject to both legislative enactments, like AS 13.26.665, and the common law of agency as interpreted and promulgated by this court. And in a common law agency relationship, unless the parties agree otherwise, the principal has a duty to indemnify the agent for expenditures that were beneficial ...


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